The vast majority of scientists agree that climate change is impacting weather patterns around the world. We see it in the sharp increase in natural disasters that affect people and businesses globally.
In fact, the United Nations Office for Disaster Risk Reduction reports that worldwide losses from earthquakes, volcanoes, floods, hurricanes and droughts have risen 151% in the past 20 years. These losses totaled about $2.9 trillion – more than twice the total of the previous two decades.1
Events like the 2016 fires in Fort McMurray, which caused approximately $4 billion in insured losses to be paid out,2 are largely out of the control of your business. That’s why it’s so important to prepare your business as best you can to reduce the risks that our new reality brings.
Climate change is risky business
Here are just some examples of potential risks associated with weather pattern changes and increased natural disasters:
- Construction and logistics disruptions: Heavy rains and storms can not only cause weather-related construction delays, but also road closures that impact your supply chain
- Forced closures: An increase in extreme weather means more involuntary shutdowns because of power outages, repair work and increased absenteeism as employees struggle to get to work safely.
- Higher or unstable energy costs: Unseasonably hot or cold temperatures can result in higher energy costs. Plus, the finite nature of our primary energy sources, coupled with increased government regulations, means more price volatility.3
- Property damage: Severe weather, like flooding, fires and windstorms, increases the likelihood of costly property damage.
- Resource and raw materials shortages: Droughts, floods and dramatic temperature fluctuations impact crop growth and can cause resource scarcity. It doesn’t matter if the weather event happens close to home or in a country halfway around the world; if it affects your suppliers or your end market, your business could suffer.
Identify risks and prepare for them
Part of mitigating risks to your business includes anticipating and preparing for the impact of climate change. This includes mapping out all scenarios that unpredictable weather that’s aggravated by climate change can bring.
Here are some tips to help you do just that.
- Enlist the help of experts to review long-term weather forecasts, rising sea-level, temperature and rainfall patterns as well as earthquake, flooding and drought risks will help identify areas of your business that are vulnerable.4
- Use forecasting data to allow your company to adjust its supply chain, provide insights into whether it should move office and manufacturing locations from high-risk areas, and give input into the construction materials and methodologies that should be used.
- Choose green alternatives and upgrades as part of your overall risk mitigation strategy that help reduce the risks associated with extreme weather events. As we know, you can prevent future losses by investing in loss prevention up front.
- Implement an enterprise risk management program. This entails creating an overarching strategy for your business and then tailoring/fine tuning it for each supplier/customer and location as there may be different risks associated with each.
With more unpredictable weather comes a need to not only prepare but also review your company’s current insurance against the potential risks. This may require additional coverage or new products to safeguard your business.
Natural disasters and weather problems affected by climate change are predicted to set Canadians back $5 billion per year by 2020.5 The threat is real and largely out of the control of your company.
What your company can control is its level of preparedness. Now is the time to take an in-depth look at the potential risks to your business and develop a plan to minimize or eliminate them – putting Mother Nature in the backseat and you back at the wheel.
1 “Disasters: UN report shows climate change causing dramatic rise in economic losses,” UN News, October 10, 2018.
2 Clarke, Dominic “Canadian Business must prepare for insurance in the age of climate change,” The Globe and Mail, July 9, 2017.
3 McKinsey Global Institute, “Resource Revolution: Tracking global commodity markets,” McKinsey & Company, September 2013 Report.
4 Hauke Engel, Per-Anders Enkvist and Kimberly Henderson, “How companies can adapt to climate change,” McKinsey & Company, July 2015.
5 Williams, Elin, “A primer on climate change mitigation and adaptation,” Canadian Professional Accountants of Canada, March 2016.